In today’s briefing:
- Haitong Securities – Portugal Bank Goodwill Impairment Surge | Overall: High Costs, Poor Revenue
- Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023
- UOB – Weaker Credit | Struggling Cost Base | Moving to Trading | A Changing Face
- HEC Pharma (1558 HK): Robust 1H23 Performance on Flu Outbreak in China
- REIT Watch – Positive rent reversions recorded across Singapore office market
- China Population Policies Impact on Healthcare Companies Series – Part 2
- An Update with Rajesh Vashist of SiTime
- China Comm Const (1800 HK): Well Worth Revisiting
- GTX: Previewing with a Weak Euro
- Furniture/Furnishings Weekly – MLKN Results Boost Sector; Consumer Confidence Dips
Haitong Securities – Portugal Bank Goodwill Impairment Surge | Overall: High Costs, Poor Revenue
- With the potential corporate action (see additional reading below) there is more interest in Haitong Securities but operationally it does not appear positive, for many reasons
- The company is seeing worse revenue growth in asset management, brokerage and investment banking, while its Haitong Bank can see far higher credit costs
- Total operating costs are now 63% of revenue, tax rate is a lot higher, litigation risks seem to be oversized, with potential impact to costs
Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023
- In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023.
- Of the 38 pair trades, 18 of them involved holdcos outperforming opcos YTD and 20 of them involved opcos outperforming holdcos in the same period.
- We highlight 38 pair trades that involve Korean holdcos and opcos.
UOB – Weaker Credit | Struggling Cost Base | Moving to Trading | A Changing Face
- UOB can be harder hit than peers due to its greater SME focus. SME’s may be less able to absorb or pass on higher costs, or manage worse demand.
- Domestic credit growth is at -4.1% in July YoY, from -3.3% YoY in June and from 2.1% in May. This can represent risk-aversion, worse demand, deteriorating credit metrics in SG.
- UOB’s Greater China lending is SGD52bn, nearly identical to Thailand, Malaysia combined. Building & Construction NPLs rose from SGD1.1bn to SGD1.4bn HoH to 2Q23.
HEC Pharma (1558 HK): Robust 1H23 Performance on Flu Outbreak in China
- Yichang HEC Changjiang Pharma (1558 HK) reported a whopping 148% YoY growth in revenue to RMB3,209M in 1H23. Net profit rebounded to RMB3,209M from a loss of RMB33M in 1H22.
- In H1 2023, revenue from Kewei, approved for first-line treatment of influenza, jumped 186% YoY to RMB2,881M, representing ~90% of total revenue, mainly due to spiking flu cases in China.
- Recently, the company obtained approval for premixed Protamine human insulin injection and submitted marketing application for its self-developed product, Yiqibuvir for the treatment of chronic Hepatitis C in China.
REIT Watch – Positive rent reversions recorded across Singapore office market
- Singapore Grade A office rent and core CBD Occupancy According to CBRE Research’s latest Singapore Occupier Sentiment Survey, office utilisation in Asia-Pacific outpaced that in Europe and the US.
- Similarly, MPACT saw positive rental reversions in its latest Q2FY23 update, with Mapletree Business Centre at 7.1 per cent and the rest of Singapore office properties and business parks at 8.9 per cent.
- Looking ahead, MPACT expects rents for business parks to remain flat or stable with minimal growth in 2023 despite the expected rise in vacancy, as new and good-quality business parks will command higher rental rates.
China Population Policies Impact on Healthcare Companies Series – Part 2
- Several provinces have successively introduced policies to encourage childbirth. Increasing medical insurance reimbursement and special additional deduction standards for personal income tax would be the common direction.
- This year is mainly a period of intensive introduction of relevant fertility support policies, so the impact on company’s performance is limited.The focus would be on next year’s financial results.
- We analyzed the performance of Livzon Pharmaceutical Group In (000513 CH),BGI Genomics (300676 CH) and Jinxin Fertility Group (1951 HK) based on their 23H1 reports, and adjusted our forecast accordingly.
An Update with Rajesh Vashist of SiTime
- This week, Rajesh Vashist of SiTime came to talk about SiTime’s new product launch, Epoch.
- SiTime is still the least understood story in semiconductors because timing is one of the least understood products or applications in semiconductors.
- Timing chips. They are the heartbeat of any system in any communications, processing, computing, or all of the above.
China Comm Const (1800 HK): Well Worth Revisiting
- The fall in share price in the last five months have sent China Communications Construction (1800 HK) back to very attractive level. The market has misread the strong 2Q23 result.
- 2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly.
- There should not be concerns about CCCC’s contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.
GTX: Previewing with a Weak Euro
- GTX is scheduled to report third quarter results on October 24, 2023, as the Company continues to make strides in expanding its product offering
- The third quarter results should serve as a catalyst since the Company was expected to repurchase shares and reduce its debt balance during the period
- The impact from the ongoing strike in North America is likely to have minimal impact to GTX if it were to continue for an extended period of time
Furniture/Furnishings Weekly – MLKN Results Boost Sector; Consumer Confidence Dips
MillerKnoll earnings sparked a second week of outperformance for the commercial/contract furniture stocks, which rose ~8% in a week when broader indices were roughly flat.
- MLKN reported adjusted EPS of $0.37 in 1QFY24, above consensus of $0.21 consensus, and upped guidance.
- Shares jumped 27% on Wednesday. All three major US firms in the sector advanced last week.
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